By Chad & Sara Huebener
The following are some of Fannie Mae's newly-released changes as of this month. Some of them will have huge implications for the upcoming real estate market, some positive, some uncertain. Many of these items will require further clarification as loan officers begin to encounter situations where these new policies take effect. Continue to watch www.WestSavageBlog.com for future updates.
1. After July 1, 2010, lenders will require a second credit report be run for all borrowers, just prior to closing. If something negative is found, it can affect the underwriting decision. If the change in credit score puts the borrower in a higher interest category, the borrower will be required to pay the higher rate, or extra discount points if required. Sellers should be aware the buyers walk a tight rope until closing, and buyers should be aware that they should not finance any major purchases prior to closing.
2. Borrowers with NO credit can continue to get pre-approved. This process, though still available, has become more paper intensive, and will require proof of payments on electric and utility bills, rent, rental verifications to name a few items, plus cancelled checks for all such payments. Extra time must be allowed for closing in these types of pre-approvals.
3. Both conventional and VA loans are requiring the seller be in title for at least 90 days. This has big implications for flippers.
4. New employees must be on the job for a minimum of 6 months before they will be approved for a loan. Schooling can be considered as part of this timeline.
5. People with common names - Bill Johnson, Dan Smith, Anna Jones - should allow more time for closings when working on FHA transactions because FHA is requiring all borrowers be cross-checked against an FHA-approval list. Persons with common names are more likely to need to clarify any issues arising from a like name appearing on the list.
6. MHFA is working on a new program coming out SOON, with a 100% - 105% loan to value, no mortgage insurance, minimum 680 credit score, income limits (not yet released), and a minimum of $1,000 of the borrower's own funds to be invested into the transaction that cannot be in the form of gift funds. Too good to be true? We don't know... More to come.
This list is not all inclusive and lenders will be working on resolving and learning the changes over the next several months.